Financial corporations, balance sheet, March 2008

Banks finance their operations through different credit sources. Customer deposits are usually regarded as the safest, least expensive and most stable of these sources. The recent turbulence in the international financial markets, with more expensive funding for banks and other financial institutions as one of the consequences, has made customer deposits an even more important credit source for banks. Many banks have increased the interest on deposits, hoping that customer deposits will increase. The turbulence in the financial market has also led to scepticism with regard to investments in the securities market. More expensive funding, increased deposit rates and scepticism with regard to investments in the securities market, are all factors which indicate an increase in the deposit/loan ratio. Figures for March 2008, however, show that both deposits and the deposit/loan ratio decreased. The explanation may be that banks still use other sources than deposits as the main financing of their operations and that loans increase more than the deposits.

Second lowest ever measured

Traditionally, Norwegian banks have had a very high deposit/loan ratio. In March 1998, the total deposit/loan ratio was 81 per cent. At end-March 2008, the total deposit/loan ratio, i.e. the share of customer loans that are financed by deposits from customers, was 62 per cent. With the exception of November 2006, when the deposit/loan ratio was 61 per cent, this is the lowest ratio ever measured. The banks’ total deposit/loan ratio decreased by nearly 2 percentage points from February to March 2008, the sharpest monthly decrease since May 2005. Deposits fell by 1.5 per cent, while loans increased by 1.2 per cent. For more information on the decrease in deposits and growth in loans, go to the money supply statistics and the credit indicator statistics .

11 percentage point decrease from March 2007

Deposits from non-financial corporations decreased by 1.4 per cent from February to March 2008, while loans to this sector increased by 2.2 per cent in the same period. As a result, the deposit/loan ratio on loans to non-financial corporations was 63 per cent at end-March 2008, a decrease of 2.3 percentage points from February, and thereby the lowest level since November 2003. Compared to March 2007, the deposit/loans ratio has fallen by a total of 11 percentage points.

The deposit/loan ratio on loans to households was close to 52 per cent at end-March 2008. This is a decrease of 0.6 percentage points from February. The decrease from February to March 2008 came after three months of increasing deposit/loan ratio on household loans. The most important cause of the decrease in the deposit/loan ratio is the almost 1 per cent decrease in deposits in the period. This is the highest monthly decrease in deposits since May 2006. The deposit/loan ratio on loans to households is, however, at the same level as it has been since November 2005, i.e. between 50 and 53 per cent. The lowest deposit/loan ratio ever measured for household loans is 49 per cent, which was in May last year.